No Sanctuary for Young Israel Synagogue

Rendering of the proposed synagogue and condo project. Image from freyerarchitects.com.

July 19, 2010, marked the fourth anniversary of a bold and ambitious decision by the congregation of an historic Lower East Side synagogue. Saddled with a crumbling building they could not afford to repair, the members of Young Israel of Manhattan voted overwhelmingly to approve a plan that offered them rebirth in a new home, along with the funds to improve and expand their programs and outreach.

In the heady real estate climate of July 2006, all parties had reason to believe the deal spelled good fortune. In simple terms, developers would demolish the decaying building at 225 East Broadway and build in its place a modern, spacious temple, valued at $5.9 million, as well as pay the synagogue $3 million in cash. In exchange, the developers could construct and sell lucrative new condominiums on top of the synagogue.

The gap between the plan and its execution, however, has grown wider and taken much longer to navigate than either side ever envisioned. The protracted demolition—announced in 2007 but not completed until April of this year—hinted at the trouble behind the scenes. Last week, the project’s principal developers spoke frankly about how their unusual development deal unraveled in a sinking market, leaving a gaping hole on the Lower East Side’s fabled Shtiebel Row.

“We’re trying to essentially renegotiate the joint venture with the synagogue,” said Anthony Marano, the managing partner of East Broadway Partners, a collection of individuals and limited liability companies. “Unfortunately, everyone’s going to have to take a little bit less than they were going to get a few years ago. The market’s just not there.”

Like so many development initiatives of all flavors across the city, Young Israel’s project was hatched at a time “when lenders provided financing to anyone with a pulse,” said Manhattan real estate expert Jonathan Miller. But as developers were pursuing necessary approvals and financing commitments in the summer of 2007, Bear Stearns failed.

“That’s when the wheels started to come off the wagon,” said Miller, president and CEO of Miller Samuel Real Estate Appraisers. A year later, the Lehman Brothers debacle marked a fatal tipping point for the market. “Anything that was standard fare before that just wasn’t any more. Funding sources were not there. The housing market was not there.”

Young Israel's old building, just before demolition began.

East Broadway Partners’ $18 million commitment from a bank evaporated, said Marano, leaving one of the Lower East Side’s most venerable synagogues stuck in the same quicksand that trapped every glass-and-steel high rise on the drawing boards.

The only step of the original plan that’s been carried out is the demolition of the 173-year-old building, which had been home to the synagogue since 1922, according to city land records. The 90-foot-by-94-foot lot that was scheduled to host High Holy Days and hipsters by now has sprouted only weeds. The congregation, which according to court documents has 366 members, remains without a permanent home, conducting its services in rented space across the street and elsewhere in the neighborhood while its religious talismans gather dust in storage.

The demolition of 225 East Broadway, April 2010. Photo by Linda Jones.

“Certain things were promised that were just not reasonable to do,” said principal partner Elliot Gibber, citing as an example a basement-level basketball court that presented engineering challenges and added costs. “And in the meantime, the market turned.”

Instead of enjoying state-of-the-art facilities, Young Israel is now fielding proposals for a completely new plan—one that scales down space and amenities for both the synagogue and the condo component.

Whether synagogue leaders will agree to reduce the scope of the project, however, remains to be seen; they aren’t discussing their position.

The empty lot as it looked last week. Photo by Jennifer Strom.

In response to requests for an interview, Nussin Fogel, an attorney who represented Young Israel in the legal dealings and serves on its board of trustees, offered this statement: “In that the synagogue and developer are attempting to resolve the issues between them, the synagogue believes it would be inappropriate to comment publicly at this time.”

Although the negotiations are private, public records on file in the New York County Clerk of Court’s office draw a detailed portrait of how the project was supposed to go.

Because the synagogue is incorporated as a non-profit religious organization, it required permission from the New York Attorney General’s office to sell such a large asset. That necessitated filing a lengthy request with the courts, which incorporated documents such as the development agreement with East Broadway Partners, an appraisal of the synagogue building and drawings of the new 14-story project (YoungIsraelPetition PDF).

Under the terms of the agreement, which was approved by the courts in August 2007, the developers agreed to build a four-story temple, appraised at $5.9 million. The plans included a double-height sanctuary, daily shul, classrooms, a banquet hall, offices, a four-bedroom, two-bath rabbi’s apartment and a roof deck with room for a Sukkah. The remainder of the deal consisted of cash payments of $3 million, $2.5 million of which was to be paid from the proceeds of condo sales.

The developers—who bought only the development rights, not the actual property—gained the right to construct up to 45,000 square feet of residential space, as well as the synagogue’s support for purchasing air rights from neighboring property owners.

Renderings of the new building, via freyerarchitects.com.

The proposed condo building, which is pictured on the architect’s web site, included a street-level lobby that would have a separate entrance from the synagogue and about two dozen apartments on 10 floors.

While the hindsight informed by current economic conditions in the Manhattan real estate market may now make the deal seem over-ambitious, back then, Young Israel was not the only religious organization striking up development partnerships.

In late 2006, Gibber, a major player in the Young Israel deal and founder of Deb-El Food Products, shepherded a real estate swap involving the Upper West Side’s Jewish Women’s Club (of which he was president at the time). The club traded parcels with a developer, resulting in a modern new mikvah, or ritual bath house, on West 74th Street.

In July 2008, the board of directors of Anshei Meseritz Synagogue on East 6th Street endorsed a condo/synagogue combination similar to Young Israel’s, though on a smaller scale. That deal fell through when the developers withdrew amid protests from preservationists seeking to protect the 100-year-old temple.

One day last week, Marano stood in the shadow of scaffolding that’s framed the empty lot at 225 E. Broadway for many months, pitching the project to a group of builders with high bond ratings, in the hopes that that bringing them aboard will boost his financing options.

The complex nature of the whole arrangement may be more than traditional commercial banks want to risk, Miller said.

“Right now, lenders are only interested in vanilla, cookie-cutter deals without unusual complications,” he said.

If and when the condos are built, consumer loans may prove just as difficult to secure, Miller said, citing the Lower East Side’s diverse housing stock.

“You have such a great contrast between the existing stock and new product that it makes the market there that much more volatile,” he said.

Despite the challenges, Gibber and Marano both say they remain optimistic the deal will come to fruition. They have extra motivation to ensure that it does, as the two of them, along with Gibber’s wife, Deborah, signed personal guarantees to assume responsibility in the event the larger partnership defaults.

“We are continuing to negotiate with the synagogue to make arrangements that are agreeable to all parties,” Gibber said. “The project is moving forward.”

For example, the developers want to eliminate the indoor basketball court altogether, and have offered to build an outdoor court instead, Marano said. He said they have proposed various scenarios for scaling down the temple’s interior spaces and are waiting to hear how those ideas are received.

The condo portion of the project would also be reduced, from 10 stories to six, and probably be built next to, rather than on top of, the synagogue space, Marano said.

Meanwhile, in accordance with the terms of the deal, East Broadway Partners continues to pay about $3,000 each month to rent space for Young Israel’s worship services and other functions. Both the partnership and the synagogue are embroiled as defendants in a civil lawsuit with the first firm hired to demolish the old building, SANO Construction Corp. of College Point, N.Y., which is suing for more than $1 million in claims of unpaid work and punitive damages. East Broadway Partners and Young Israel have refuted the claims; depositions are scheduled for early August.

“We’re trying to live up to our end,” Marano said, surveying the empty lot last week. “We just need a way to get from point A to point B.”

Sorry, your comment made me chuckle, and I couldn’t resist commenting. Which of the 20 story Seward Park towers, as well as Seward Park extension, the East River Houses etc etc would this building be “too tall for?” Would it be too tall compared to the 12 story Bialystoker nursing home directly across from it? Or the even taller Forward Building down the street? Do you perhaps mean that it would be too tall for that particular block? Or that you personally don’t want your view of the East River blocked? Let’s say what we mean. Clearly, more people in the “neighborhood” live in tall buildings at this point than low-rise ones. Whether we like it or not, it’s a fact.